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[No. 33637. December 31, 1931]

ANG GIOK CHIP, doing business under the name and style of Hua
Bee Kong Si, plaintiff and appellee, vs. SPRINGFIELD FIRE &
MARINE INSURANCE COMPANY, defendant and appellant.
1. INSURANCE; SECTION 65, INSURANCE ACT, ACT No. 2427,
AS AMENDED, CONSTRUED; VALIDITY OF A WARRANTY
IN THE FORM OF A RIDER TO AN INSURANCE POLICY.A
warranty referred to in the policy as forming part of the contract of
insurance and in the form of a rider to the insurance policy is valid
and sufficient under section 65 of the Insurance Act.
2. ID.; ID.; ID.A rider attached to the policy of insurance is a part
of the contract, to the same extent and with like effect as if actually
embodied therein.
3. ID.; ID.; ID.An express warranty must appear upon the face of
the policy of insurance, or be clearly incorporated therein and made
a part thereof by explicit reference, or by words clearly evidencing
such intention.
4. ID.; ID.; ID.; ACCEPTANCE OF POLICY.The receipt of a
policy of insurance by the insured without objection binds the
acceptor and the insured to the terms thereof.

376

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Ang Giok Chip vs. Springfield Fire & Marine Insurance Co.

5. STATUTES; CONSTRUCTION OF STATUTES ADOPTED

FROM OTHER STATES.The Philippine law on insurance was
taken verbatim from the law of California. Accordingly, the courts
of the Philippines should follow in fundamental points at least, the
construction placed by California courts on a California law.

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APPEAL from a judgment of the Court of First Instance of Manila.

Diaz, J.
The facts are stated in the opinion of the court.
C. A. Sobral for appellant.
Paredes & Buencamino for appellee.
Gibbs & McDonough and Roman Ozaeta as amici curi.
MALCOLM, J.:
An important question in the law of insurance, not heretof ore
considered in this jurisdiction and, according to our information, not
directly resolved in Calif ornia from which State the Philippine
Insurance Act was taken, must be decided on this appeal for the
future guidance of trial courts and of insurance companies doing
business in the Philippine Islands. This question, flatly stated, is
whether a warranty referred to in the policy as f orming part of the
contract of insurance and in the form of a rider to the insurance
policy, is null and void because not complying with the Philippine
Insurance Act. The court has had the benefit of instructive briefs and
memoranda from the parties and has also been assisted by a well
prepared brief submitted on behalf of amici curi.
The admitted facts are these: Ang Giok Chip doing business
under the name and style of Hua Bee Kong Si was formerly the
owner of a warehouse situated at No. 643 Calle Reina Regente, City
of Manila. The contents of the warehouse were insured with three
insurance companies for the total sum of P60,000. One insurance
policy, in the amount of P10,000, was taken out with the Springfield
Fire & Marine Insurance Company. The warehouse was destroyed
by fire on January 11, 1928; while the policy issued by the latter
company was in force.
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Ang Giok Chip vs. Springfield Fire & Marine Insurance Co.

Predicated on this policy the plaintiff instituted action in the Court

of First Instance of Manila against the defendant to recover a
proportional part of the loss coming to P8,170.59. Four special
defenses were interposed on behalf of the insurance company, one
being planted on a violation of warranty F fixing the amount of
hazardous goods which might be stored in the insured building. The
trial judge in his decision found against the insurance company on
all points, and gave judgment in favor of the plaintiff for the sum of
P8,188.74. From this judgment the insurance company has appealed,
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and it is to the first and fourth errors assigned that we would address
particular attention.
Considering the result at which we arrive, it is unnecessary for us
to discuss three of the four special defenses which were made by the
insurance company. We think, however, that it would be a
reasonable deduction to conclude that more than 3 per cent of the
total value of the merchandise contained in the warehouse
constituted hazardous goods, and that this per cent reached as high
as 39. We place reliance on the consular invoices and on the
testimony of the adjuster, Herridge. Having thus swept to one side
all intervening obstacles, the legal question recurs, as stated in the
beginning of this decision, of whether or not warranty F was null
and void.
To place this question in its proper light, we turn to the policy
issued by the Springfield Fire & Marine Insurance Company in
favor of the plaintiff. The description of the risk in this policy is as
follows:
"Ten thousand pesos Philippine Currency.On general nonhazardous merchandise, chiefly consisting of chucherias, also
produce, Cacao, Flour, all the property of the Insured, or held by
them in trust, on commission or on joint account with others, or for
which he is responsible, while contained during the currency of this
policy in the godown, situate No. 643 Calle Reina Regente. * *
*
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Ang Giok Chip vs. Springfield Fire & Marine Insurance Co.

"This policy is subject to the hereon attached 'Ordinary Short

Period Rate Scale' Warranties A & F, Co-insurances Clause 'and
Three Fourths Loss Clause,' which are forming part of same. Coinsurance declared:
"P20,000.Sun Insurance Office Ltd. (K & S)." (Italics
inserted.) Securely pasted on the left hand margin of the face of the
policy are five warranties and special clauses. One of them is
warranty F, specifically referred to on the f ace of the policy, reading
in part as f ollows:
"WARRANTY F
"It is hereby declared and agreed that during the currency of this
policy no hazardous goods be stored in the Building to which this
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insurance applies or in any building communicating therewith,

provided, always, however, that the Insured be permitted to store a
small quantity of the hazardous goods specified below, but not
exceeding in all 3 per cent of the total value of the whole of the
goods or merchandise contained in said warehouse, viz; * *
*."
The applicable law is found in the Insurance Act, Act No. 2427,
as amended, section 65 reading:
"Every express warranty, made at or before the execution of a
policy, must be contained in the policy itself, or in another
instrument signed by the insured and referred to in the policy, as
making a part of it." As the Philippine law was taken verbatim from
the law of California, in accordance with well settled canons of
statutory construction, the court should follow in fundamental
points, at least, the construction placed by California courts on a
California law. Unfortunately the researches of counsel reveal no
authority coming from the courts of California which is exactly on
all fours with the case before us. However, there are certain
considerations lying at the basis of California law and certain
indications in the California decisions which point the way for the
decision in this case.
Section 65 of the Philippine Insurance Act corresponds to section
2605 of the Civil Code of California. The com379

VOL. 56, DECEMBER 31, 1931

379

Ang Giok Chip vs. Springfield Fire & Marine Insurance Co.

ments of the Code Examiners of California disclose that the

language of section 2605 was quite diff erent from that under the
Code as adopted in 1872. That language was f ound too harsh as to
insurance companies. The Code Examiners' notes state: "The
amendment restores the law as it existed previous to the Code: See
Parsons on Maritime Law, 106, and Phillips on Insurance, sec. 756."
The passage referred to in Phillips on Insurance, was worded by the
author as follows:
"Any express warranty or condition is always a part of the policy,
but, like any other part of an express contract, may be written in the
margin, or contained in proposals or documents expressly referred to
in the policy, and so made a part of it." The annotator of the Civil
Code of Calif ornia, after setting forth these facts, adds:
"* * * The section as it now reads is in harmony with the
rule that a warranty may be contained in another instrument than the
policy when expressly referred to in the policy as forming a part
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thereof: * * *."
What we have above stated has been paraphrased from the
decision of the California Court of Appeals in the case of Isaac
Upham Co. vs. United States Fidelity & Guaranty Co. ([1922], 211
Pac., 809), and thus discloses the attitude of the California courts.
Likewise in the Federal courts, in the case of Conner vs. Manchester
Assur. Co. ([1904], 130 Fed., 743), section 2605 of the Civil Code
of California came under observation, and it was said that it "is in
effect an affirmance of the generally accepted doctrine applicable to
such contracts."
We, therefore, think it wrong to hold that the California law
represents a radical departure from the basic principles governing
the law of insurance. We are more inclined to believe that the
codification of the law of California had exactly the opposite
purpose, and that in the language of the Federal court it was but an
affirmance of the generally accepted doctrine applicable to such
contracts. This being
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PHILIPPINE REPORTS ANNOTATED

Ang Giok Chip vs. Sprinfield Fire & Marine Insurance Co.

true, we turn to two of such well recognized doctrines. In the first

place, it is well settled that a rider attached to a policy is a part of the
contract, to the same extent and with like effect as if actually
embodied therein. (I Couch, Cyclopedia of Insurance Law, sec.
159.) In the second place, it is equally well settled that an express
warranty must appear upon the face of the policy, or be clearly
incorporated therein and made a part thereof by explicit reference, or
by words clearly evidencing such intention. (4 Couch, Cyclopedia of
Insurance Law, sec. 862.)
Section 65 of the Insurance Act and its counterpart, section 2605
of the Civil Code of California, will bear analysis as tested by reason
and authority. The law says that every express warranty must be
"contained in the policy itself." The word "contained," according to
the dictionaries, means "included," "inclosed," "embraced,"
"comprehended," etc. When, therefore, the courts speak of a rider
attached to the policy, and thus "embodied" therein, or of a warranty
"incorporated" in the policy, it is believed that the phrase "contained
in the policy itself" must necessarily include such rider and
warranty. As to the alternative relating to "another instrument,"
"instrument" as here used could not mean a mere slip of paper like a
rider, but something akin to the policy itself, which in section 48 of
the Insurance Act is defined as "The written instrument, in which a
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contract of insurance is set forth." In California, every paper writing

is not necessarily an "instrument" within the statutory meaning of
the term. The word "instrument" has a well defined definition in
California, and as used in the Codes invariably means some written
paper or instrument signed and delivered by one person to another,
transferring the title to, or giving a lien, on property, or giving a
right to debt or duty. (Hoag vs. Howard [1880], 55 Cal., 564; People
vs. Fraser [1913], 137 Pac., 276.) In other words, the rider, warranty
F, is contained in the policy itself, because by the contract of
insurance agreed to by the parties
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Ang Giok Chip vs. Springfield Fire & Marine Insurance Co.

it is made to form a part of the same, but is not another instrument

signed by the insured and referred to in the policy as forming a part
of it.
Again, referring to the jurisprudence of California, another rule
of insurance adopted in that State is in point. It is admitted that the
policy before us was accepted by the plaintiff. The receipt of this
policy by the insured without objection binds both the acceptor and
the insured to the terms thereof. The insured may not thereafter be
heard to say that he did not read the policy or know its terms, since it
is his duty to read his policy and it will be assumed that he did so. In
California Jurisprudence, vol. 14, p. 427, from which these
statements are taken with citations to California decisions, it is
added that it has been held that where the holder of a policy
discovers a mistake made by himself and the local agent in attaching
the wrong rider to his application, elects to retain the policy issued
to him, and neither requests the issuance of a different one nor offers
to pay the premium requisite to insure against the risk which he
believed the rider to cover, he thereby accepts the policy.
We are given to understand, and there is no indication to the
contrary, that we have here a standard insurance policy. We are
further given to understand, and there is no indication to the
contrary, that the issuance of the policy in this case with its attached
rider conforms to well established practice in the Philippines and
elsewhere. We are further given to understand, and there is no
indication to the contrary, that there are no less than sixty-nine
insurance companies doing business in the Philippine Islands with
outstanding policies more or less similar to the one involved in this
case, and that to nullify such policies would place an unnecessary
hindrance in the transactions of insurance business in the
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Philippines. These are matters of public policy. We cannot believe

that it was ever the legislative intention to insert in the Philippine
Law on Insurance an
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PHILIPPINE REPORTS ANNOTATED

Ang Giok Chip vs. Springfield Fire & Marine Insurance Co.

oddity, an incongruity, entirely out of harmony with the law as

found in other jurisdictions, and destructive of good business
practice.
We have studied this case carefully and having done so have
reached the definite conclusion that warranty F, a rider attached to
the face of the insurance policy, and referred to in the contract of
insurance, is valid and sufficient under section 65 of the Insurance
Act. Accordingly, sustaining the first and fourth errors assigned, and
it being unnecessary to discuss the remaining errors, the result will
be to reverse the judgment appealed from and to order the dismissal
of the complaint, without special pronouncement as to costs in either
instance.
Street, Villamor, Ostrand, and Romualdez, JJ., concur.
VILLA-REAL, J., dissenting:
I fully concur in the dissenting opinion penned by Justice Imperial,
and f urther say that a rider or slip attached to an insurance policy,
though referred to therein as making a part of it, is not one of the
forms prescribed by section 65 of the Insurance Law in which an
express warranty may be made to appear validly so as to be binding
between the insurer and the insured. There are two, and only two
forms provided in said section by which an express warranty may be
made to appear validly, to wit: by embodiment either in the
insurance policy itself or in another instrument signed by the insured
and referred to in the policy as making a part of it.
Now the question arises as to whether the rider or slip containing
said warranty F attached to the policy in question and referred to
therein as making a part thereof is one of the two forms provided in
said section 65 of the Insurance Law.
It is admitted that it is not the second form, because not being
signed by the insured it does not constitute an instrument. (Hoag vs.
Howard [1880], 55 Cal., 564; People vs. Fraser [1913], 137 Pac.,
276.)
383
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VOL. 56, DECEMBER 31, 1931

383

Ang Giok Chip vs. Springfield Fire & Murine Insurance Co.

Is it the first form required by law, that is, is it contained in the

policy itself? It is so contended in the majority opinion and
authorities are cited in support of such contention.
In 1 Couch, Cyclopedia of Insurance Law, par. 159, it is said that
"as a general rule, a rider or slip attached to a policy or certificate of
insurance is, prima facie at least, a part of the contract to the same
extent, and with like effect, as if actually embodied therein,
provided, of course, that it does not violate any statutory inhibition,
and has been lawfully, and sufficiently attached, * * *" (See also 32
Corpus Juris, 1159, par. 270).
Does the attachment of a rider or slip containing an express
warranty contravene the provisions of section 65 of the Insurance
Law? When the law, in order to protect the insured, requires that an
express warranty be contained in the policy or in another instrument
referred to therein as making a part thereof, it could not have been
its intention to permit that such express warranty be contained in a
piece of paper not signed by the insured although it is attached to the
policy and referred to therein as making a part thereof, because it
would be contrary to the requirement that such express warranty be
contained in an instrument signed by the insured. It is a general rule
of statutory construction that a law should not be so construed as to
produce an absurd result. It would certainly be an absurdity if
section 65 of the Insurance Law were construed as requiring that an
express warranty be contained only in the policy or in another
instrument signed by the insured and referred to therein as making a
part thereof for the protection of such insured, and at the same time
permitting that such express warranty be contained in a piece of
paper not signed by the insured but simply attached to the policy and
referred to therein as making a part thereof, thus opening the door to
fraud,it being easy to detach such rider or slip and change it with
another,which is precisely
384

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PHILIPPINE REPORTS ANNOTATED

Ang Giok Chip vs. Springfield Fire & Marine Insurance Co.

what the law is trying to prevent. It will thus be seen that the
attachment of a rider or slip containing an express warranty to a
policy, although referred to therein as making a part thereof, is
contrary to the evident intent and purpose of section 65 of the
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Insurance Law.
In the case of Isaac Upham Co. vs. United States Fidelity &
Guaranty Co. (211 Pac., 809), cited in the majority opinion, the
question was whether a warranty contained in an application for
insurance, which was not referred to in the policy as making a part
thereof, incorporated said warranty in the said policy and was valid.
The Supreme Court of California held that it was not, for lack of
such reference. Of course an application for insurance is a document
signed by the insured, and an express warranty contained therein if
referred to in the policy as making a part thereof, will be considered
as contained therein in accordance with law.
In the case of Conner vs. Manchester Assur. Co. (130 Fed., 743),
also cited in the majority opinion, the question was whether an open
policy was a warranty and the Circuit Court of Appeals for the
Northern District of California held that it was not, and further said
that "section 2605 of the Civil Code of California (from which
section 65 of the Insurance Law was taken) was evidently intended
to express in statutory form the rule that no express warranty made
by the insured shall affect the contract of insurance, unless it be
contained in the policy or in the application, or some other
instrument signed by the insured and made a part of the contract,
and is in effect an affirmance of the generally accepted doctrine
applicable to such contracts." It will be seen from this statement that
the court in enumerating the forms in which an express warranty
may be expressed or made to appear does not mention any paper
which is not signed by the insured.
The fact that for many years it has been the practice of the
insurance companies to use riders or slips of papers containing
express warranties without the signature of the
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Ang Giok Chip vs. Springfield Fire & Marine Insurance Co.

insured in violation of the law is no reason why such practice should

be permitted to continue when its legality is questioned.
In view of the foregoing consideration, I am constrained to
dissent from the opinion of the majority.
IMPERIAL, J., with whom concurs AVANCEA, C. J., dissenting:
The decision of this case depended principally, but wholly, on
the validity of the warranty F, Exhibit A-2. This instrument consists
of a slip of paper pasted on the margin of a page of the fire insurance
policy. It contains the stipulation that the insured is permitted to
store in the building concerned the hazardous goods specified, to an
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amount not exceeding three per cent of the total value of the
merchandise stored. The policy makes reference to this rider as
follows: "This policy is subject to the hereon attached 'Ordinary
Short Period Rate Scale/ Warranties A and F, Co-insurances clause
and Three Fourths Loss Clause' which are forming part of the same";
but the rider is not signed by the insured.
Section 65 of Act No. 2427 (Insurance Law) reads as follows:
"Every express warranty, made at or before the execution of a
policy, must be contained in the policy itself, or in another
instrument signed by the insured and referred to in the policy, as
making a part of it."
An express warranty, then, made at or before the execution of the
policy, like warranty F, is valid only if it is contained in the policy
itself, or in another instrument signed by the insured and referred to
in the policy as forming a part thereof. Examining warranty F, it
may be seen that it does not form an integral part of the policy but
appeals on another slip of paper pasted on the policy; it is therefore
an instrument other than the policy and comes under the second
paragraph provided for in section 65. And, according to this
provision, warranty F cannot be valid or binding, for the simple
reason that it is not signed
386

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PHILIPPINE REPORTS ANNOTATED

People vs. Ponce de Leon

by the insured, and has no weight, notwithstanding the f act that

reference is made to it in a general way in the body of the policy.
This reference is not equivalent to including it in the policy, for the
simple reason, as we have said, that it was made in a general way. It
is mentioned simply as warranty F, without giving any idea of its
contents. The term of the rider might be changed and the heading
"Warranty P" retained, and, following the appellant's line of
reasoning, it might, with equal plausibility, be defended as the
express warranty agreed upon, because it was headed "Warranty F."
It is just such alterations as this that the law seeks to prevent in
requiring that all warranties of the kind are to be signed by the
insured and ref erred to in the policy.
Setting aside for the moment the legal question of the validity of
the warranty, and assuming warranty F to be valid, we have to
consider another circumstance which indicates that the insured did
not violate it. The trial court found that at the time of the fire, the
inflammable goods in the warehouses or building of the insured did
not exceed the amount permitted by the insurance company, that is,
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three per cent of the total value of the merchandise stored. This
finding is borne out by the evidence, and there is no reason for
changing it and making another.
For these reasons, I believe the judgment appealed from should
be affirmed in its entirety.
Judgment reversed.
___________

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